Two years of the land market: results and prospects
Managing Partner of Kosovan Legal Group Anatoliy Kosovan commented on the results of the first two years, prospects and necessity to launch the second stage for the final article of Agropolit.com dedicated to the second anniversary of the land market.
1) Please evaluate the land market performance over the past two years: what trends do you observe – positive or negative?
Unfortunately, due to Russia’s unprovoked large-scale invasion, it is difficult to provide an objective assessment of the land market. These circumstances have changed both the plans and desires of buyers and sellers. Some decided to save working capital and not make land investments, while others decided to sell as soon as possible for any amount out of fear. However, the vast majority of land acquisitions we are currently witnessing are purchases by tenants of the land they are cultivating.
As for the positive aspects of the process, they continue to be primarily the very launch and civilized establishment of the process. Also, companies that grow perennial plants, such as orchards and vineyards, have the opportunity to protect their investments by purchasing land.
As for the negative aspects, at this stage, the previous attempts of conditional buyers to circumvent the moratorium at the time of its existence are becoming more and more tangible. Of course, everyone expects a certain spirit revival after the opening of access to land acquisition for companies. It should not be forgotten that at the same time, the land area allowed for purchase by individuals will also increase significantly to 10 thousand hectares. All this in aggregate will certainly increase market activity and the number of transactions, but we should not expect a huge surge. The reason for this is just like at the launch of the market, there is currently no significant pent-up demand, as most of the buyers who were ready to make the relevant investments began to make them through individuals.
2) Price – how much does a potential seller lose per hectare because of the war, and what are the forecasts for the future?
Regarding the buyer’s losses, I am not sure that a potential seller loses anything if his land remains in a suitable condition for cultivation, and there are 2 aspects to consider here:
– Loss of value of money. By holding such an asset as an agricultural land plot and receiving rent for it, the owner conditionally receives a percentage of his investment. The big question is whether the seller would have made any reliable investment if he had sold the land plot and what percentage of income he would have received.
– Loss of value of the land plot. The answer to the question of the loss of price value can be given only at the time of the actual sale of the land plot. As for future price forecasts, they will directly depend on the economic policy and the success of real reforms in the country.
3) Why is there still a strong interest of investors in land: is it because of the low entry price to the market after the war or something else?
The current level of demand is primarily driven by expectations of significant increase in land values in the future, and sometimes by a real decline. But then again, a real investor cannot purchase land at the moment due to current restrictions. Perhaps the situation will change in some way if the scheduled changes come into force as planned. Then new players may appear in the land market, who will be able to collect land in tangible clusters at individual companies and sell them in the future as a single lot through the alienation of corporate rights.